SHOWA CORPORATION
1 SHOWA Philosophy
2 Message from the President
3 Review of Operations
6 Consolidated Financial Statement
8 Topics
12 ’ s lobal etwor
15 howa’ s echnology
16 utloo of onsolidated usiness erformance SHOWA Philosophy
Corporate Culture
Our Corporate Principle Policies of Conduct
Our Fundamental Beliefs
－ Our Fundamental Beliefs － Respect for the individuals Trust/Fairness/Independence － Our Corporate Principle － With the aim of becoming a global company trusted by customers worldwide, we are committed to making continuous innovations to provide superior products of the best technology and the highest quality to meet users’ needs. － Policies of Conduct － 1.Let actions be driven by ideals and visions 2.Value time and ideas, and approach problems based on fundamentals and principles 3.Place value on communications and understand the situation of others 4.Maintain operational transparency and soundness 5.Always be aware of environmental preservation, and make contributions to the community and society
1 Message from the President
Dear Shareholders
We would like to express our sincere appreciation for your continued support.We are pleased to present this summary of our results for the 110th term (April 1, 2017 to March 31, 2018).
In the 110th term, sales revenue grew year-on-year on increased sales of motorcycle, automotive, and steering products. Operating profit, pre-tax income, and net income attributable to owners of the parent grew year-on-year due to changes in the variable cost ratio to sales, successful cost reduction measures, and a decline in provisions for product warranties.
Upon comprehensive consideration of the long-term outlook for our business endeavors and earnings results, we have decided to raise the year-end dividend to 12 yen per share at the 110th General Meeting of Shareholders to express our gratitude for your continued support. With an interim dividend of 10 yen per share, we intend to pay an annual dividend of 22 yen per share. Based on our projections for business performance and earnings results for the next term (April 1, 2018 to March 31, 2019), we expect to set the interim and the year-end dividends both to 15 yen per share , and pay an annual dividend of 30 yen per share.
We kindly ask for your continued support and understanding.
September 2018
Nobuyuki Sugiyama President
2 “Supplementary materials” Earnings results for the fiscal year ended March 31, 2018
Status of our group
Overview of consolidated earnings In the fiscal year ended March 31, 2018, the global economy was on the path of gradual recovery. Market environments surrounding SHOWA slowly recovered in Japan and the US, and showed continued signs of recovery in China. In the automotive market, sales in the US fell year-on-year, but sales in Japan grew prompted by the launch of new kei cars (light automobiles). Sales in China and Europe were robust as well. Under such circumstances, SHOWA made progress in the following initiatives implemented based on the group’ s medium- to long-term policy: Establishing a stable production base, optimizing production allocation, developing new technology and products, strengthening basic technology to respond to commoditization of products, improving cost competitiveness through optimized procurement, and enhancing quality by strictly adhering to the global quality control standards. Sales revenue for the fiscal year ended March 31, 2018 increased by 32,493 million yen (+12.5%) year-on-year to 291,989 million yen due to increased sales of motorcycle, automotive, and steering products. Operating profit came to 25,296 million yen (vs. an operating loss of 3,263 million yen in the previous fiscal year) due to changes in the variable cost ratio to sales, successful cost reduction measures, and a decline in provisions for product warranties. Pre-tax income was 26,042 million yen (vs. a pre-tax loss of 2,407 million yen in the previous fiscal year). Net income attributable to owners of parent was 13,855 million yen (vs. a net loss of 11,444 million yen in the previous fiscal year). Earnings results by segments are as follows.
Motorcycle and Hydraulic Components segment Sales of motorcycle products increase year-on-year owing to sales growth in Japan and other regions in Asia. Sales revenue of the Motorcycle and Hydraulic Components segment was up by 8,689 million yen (+11.7%) year-on-year to 82,678 million yen thanks to growth in the sale of motorcycle products. Operating profit rose 2,805 million yen (+30.1%) year-on-year to 12,139 million yen.
Automotive Components segment Sales of automotive components increased year-on-year on higher sales mainly in China and Japan. Sales revenue of the Automotive Components segment was up by 7,645 million yen (+9.0%) year-on-year to 92,209 million yen thanks to an increase in sales of automotive products. Operating profit was up 1,167 million yen (+24.3%) year-on-year to 5,969 million yen.
Steering Systems Components segment Sales of steering products grew year-on-year largely on the back of higher sales in China and other regions in Asia. Sales revenue at the Steering Systems Components segment was up 15,835 million yen (+18.4%) year-on-year to 102,041 million yen thanks to an increase in the sale of steering products. Operating profit rose 7,290 million yen (+93.2%) year-on-year to 15,110 million yen.
Gas Springs segment Sales revenue at the Gas Springs segment fell 219 million yen (-6.3%) year-on-year to 3,245 million yen. Operating loss came to 8,397 million yen (vs. an operating loss of 25,703 million yen in the previous fiscal year) due to the booking of provisions for product warranties.
Other segment Sales revenue at the Other segment was up by 542 million yen (+4.8%) year-on-year to 11,815 million yen. Operating profit fell by 93 million yen (-16.4%) year-on-year to 475 million yen.
3 Review of Operations
Sales revenue Operating profit
(Unit：Million Yen) (Unit：Million Yen) 291,989 25,296 300,000 25,000 266,407 258,246 259,495 250,000 20,000 200,000 15,978 15,000 150,000 10,000 100,000 7,568
50,000 5,000 △3,263 0 0 March 2015 March 2016 March 2017 March 2018 (IFRS) (IFRS) (IFRS) (IFRS) -5,000 March 2015 March 2016 March 2017 March 2018 (IFRS) (IFRS) (IFRS) (IFRS)
Profit for the year Attributable to owners Net income per share of the parent
(Unit：Million Yen) (Unit：Million Yen) 15,000 13,855 18,000
15,000 12,000 11,570 13,449 12,000 9,000 9,507 9,000 6,000 6,000 3,000 3,000 △2,348 △11,444 △1,872 △17,971 0 0
-3,000 -3,000 -180,000 -12,000 March 2015 March 2016 March 2017 March 2018 March 2015 March 2016 March 2017 March 2018 (IFRS) (IFRS) (IFRS) (IFRS) (IFRS) (IFRS) (IFRS) (IFRS)
Sales Recurring profit
(Unit：Million Yen) (Unit：Million Yen) 120,000 250,000 109,129 103,373 100,190 20,990 100,000 92,130 200,000 80,000 150,000 60,000 100,000 8,849 9,608 40,000 7,742
20,000 50,000
0 0 March 2015 March 2016 March 2017 March 2018 March 2015 March 2016 March 2017 March 2018 (IFRS) (IFRS) (IFRS) (IFRS) (IFRS) (IFRS) (IFRS) (IFRS)
* From the previous fiscal year, our group has made a switch from Japanese accounting standards to voluntary application of International Financial Reporting Standards (IFRS). The 106th reports are based on Japanese standards, and the 107th ,108thand 109th on IFRS.
4 Review of Operations
(Numerical unit of bar graph: 1 million yen) * From the previous fiscal year, our group has made a switch from Japanese accounting standards to voluntary application of International Financial Reporting Standards (IFRS), and therefore, 107th and 108th reports are based on IFRS.
5.2% 28.3% Gas springs segment/Others Motorcycle and Hydraulic components segment
Sales revenue 15,060 million Sales revenue 82,678 million (2.2% increase from the previous fiscal year) (11.7% increase from the the previous fiscal year)
Operating Profit △7,922 million Operating Profit 12,139 million (Operating loss in the previous fiscal year (30.1% increase from the previous fiscal year) was 25,134 million yen) Sales revenue Operating Profit
Sales revenue Operating Profit 82,678 12,139 73,988 14,737 15,060 9,333
Sales revenue by Operational △25,134 △7,922 Segment Total 109th term 110th term 291,989million 109th term 110th term 109th term 110th term
109th term 110th term
34.9% 31.6% Steering systems components segment Automotive components segment
Sales revenue 102,041 million Sales revenue 92,209 million (18.4% increase from the previous fiscal year) (9.0% increase from the previous fiscal year)
Operating Profit 15,110 million Operating Profit 5,969 million (93.2% increase from the previous fiscal year) (24,3% increase from the previous fiscal year)
Sales revenue Operating Profit Sales revenue Operating Profit 102,041 15,110 92,209 5,969 86,205 84,563 4,801
7,820
109th term 110th term 109th term 110th term 109th term 110th term 109th term 110th term
Segment results
Segment Main cause Motorcycle and Hydraulic Although sales of motorcycle products decreased mainly in South America, overall sales increased over the previous components segment fiscal year due to sales increase in Asia. Automotive components segment Overall sales of automotive products decreased compared with the previous fiscal year mainly due to a decline in sales in North America. Steering components segment Overall sales of steering products increased over the previous fiscal year mainly due to an increase in sales in North America and China.
5 Consolidated Financial Statements
※1＄＝106.24 Yen
Consolidated Balance Sheet (Summary) Millions of yen Millions of yen Thousands of U.S. dollars 2017 2018 2018 Assets Current assets 115,647 119,846 1,128,069 Noncurrent assets 90238 82,120 772,967
Total assets 205885 201,967 1,901,045
Liabilities Current liabilities 85695 74,219 698,598 Noncurrent liabilities 22849 18,089 170,265
Total Liabilities 108,544 85,680 806,476
shareholders ' equity Common stock 12,698 12,698 119,522 Capital surplus 13,417 13,417 126,290 Retained earnings 53,186 68,679 646,451 Treasury stock -54 -54 -508 Other components of shareholders’ equity 4,904 1,335 12,566 Equity attributable to owners of the parent company 84,152 96,075 904,320 Noncontrolling interest 13,188 13,582 127,843
Total shareholders’ equity 97,340 109,658 1,032,172
Total liabilities and shareholders’ equity 205,885 201,967 1,901,045
Assets, liabilities, and shareholders’ equity: Total assets at the end of the fiscal year ended March 31, 2018 was 201,967 million yen, down 3,917 million yen year-on-year.
Current assets : Up by 4,199 million yen year-on-year largely due to an increase in cash and cash equivalents despite a decline in other current assets.
Noncurrent assets : Fell by 8,117 million yen year-on-year mainly on declines in tangible assets and other financial assets.
Current liabilities : Declined by 11,475 million yen year-on-year largely due to decreases in short-term interest bearing debts and provisions.
Noncurrent liabilities : Fell by 4,759 million yen year-on-year on declines in other financial liabilities and deferred tax liabilities.
Shareholders’ equity : Increased by 12,317 million yen year-on-year on higher retained earnings.
6 Consolidated Financial Statements
※1＄＝106.24 Yen Profit and loss calculator (Summary) Millions of yen Millions of yen Thousands of U.S. dollars 2017 2018 2018
Sales revenue 259,495 291,989 2,748,390 Cost of sales (204,701) (223,885) (2,107,351) Gross profit 54,794 68,103 641,030 Selling, general and administrative expenses (56,230) (42,362) (398,739) Other income 471 2,147 20,209 Other expense (2,298) (2,592) (24,398) Operating income (3,263) 25,296 238,102 Finance income 748 736 6,928 Finance costs (198) (532) (5,008) Gains and loses on equity method investment 306 542 5,102 Income before income taxes (2,407) 26,042 245,124 Corporate income tax (5,932) (7,704) (72,515) Current net income (8,340) 18,338 172,609 Attributable net income Owners of the parent (11,444) 13,855 130,412 Non-controlling interests 3,103 4,483 42,197
Cash flow (Summary) ※1＄＝112.68 Yen Millions of yen Millions of yen Thousands of U.S. dollars 2017 2018 2018
Net cash provided by (used in) operating activities 7,144 24,921 234,573 Net cash provided by (used in) investing activities (11,048) (4,287) (40,352) Net cash provided by (used in) financial activities 7,420 (11,669) (109,836) Effect of exchange rate change on cash and (440) (596) (5,610) cash equivalents
Effect of exchange rate change on cash 3,076 8,367 78,756 and cash equivalents（△:decrease） Cash and cash equivalents at Beginning of Year 27,139 30,215 284,403 Cash and cash equivalents at End of Year 30,215 38,583 363,168
Status of cash flows: The balance of cash and cash equivalents (hereinafter capital) at the end of the current term was 38,583 million yen, up by 8,367 million yen year-on-year.
Net cash provided by (used in) operating activities: Pre-tax income of 26,042 million yen and depreciation and amortization costs of 9,663 million yen contributed to an increase in cash flows. Cash outflows were largely due to 7,506 million yen in income tax payments and a 4,882 million yen increase in provisions for product warranties.
Net cash provided by (used in) investing activities: Cash inflows were largely from a gain of 3,861 million yen on the sale or redemption of financial assets, and cash outflows were mainly attributed to payments of 7,545 million yen accompanying the acquisition of tangible assets.
Net cash provided by (used in) financing activities: Cash outflows were largely attributed to a net decrease of 6,551 million yen in short-term interest bearing debts and dividend payments of 3,462 million yen to non-controlling shareholders.
7 Topics
Expanded the range of automobiles with electronically controlled damper IECAS and high-performance model S-SEESII installed
We have been able to expand the range of automobiles with our products installed. Electronically controlled damper IECAS (Intelligent Electronic Control Adaptive Suspension) is newly installed in Honda Motor’ s high-grade models of new CIVIC Si (for North American and European markets) and new ACCORD (for the North American market). Further, our high-performance model S-SEESII (Showa Super Empowering Efficient Suspension) is installed in Honda Motor’ s new N-BOX. By using a hollow rod, S-SEESII contributed to reducing the weight of N-BOX.
CVIC Si N-BOX
Business transactions with India’ s motorcycle manufacturer TVS Motor Co., Ltd. has begun
We have initiated business transactions with our new customer TVS Motor, a motorcycle manufacturer with the third largest market share in India. Our front fork and rear cushion are adopted in TVS Motor’ s Jupiter (125cc scooter), and we have started manufacturing these products at SHOWA India Pvt. Ltd. (India). We aim to further increase our market share in India, which boasts the world’ s largest motorcycle sales volume.
Jupiter (125 cc scooter) Front fork Rear cushion
8 Topics
Status of our group
Following our participation in IAA 2015, we exhibited our products at IAA 2017 held in Frankfurt, Germany in September 2017. With the theme of “Performance, Pleasure, and Progress: Bringing ultimate comfort and excitement to all,” we presented steering/suspension cooperative control that is realized by combining electric power steering technology and electronically controlled damper technology. Further, we introduced our products and technologies that are compatible with autonomous driving and electrification.
Completed construction of winding courses at Tochigi R&D Center Shioya Proving Groundn
We held a ceremony for the completion of winding courses at Tochigi R&D Center Shioya Proving Ground on October 20, 2017. Many attended the ceremony including municipality officials and our valued customers. In the first phase of construction in 2015, straight roads, curves, and special roads were completed first and then the winding courses that mimic general roads of the US and Europe were built in the second phase of construction. Prompted by the completion of the winding courses, we will continue to propose and develop products and technologies with an aim of strengthening a V-shaped development system.
9 Topics
Electronically controlled variable damping force damper SHOWA EERA Balance Free Damping Force was installed in Kawasaki’ s Ninja ZX-10R
Our electronically controlled variable damping force damper SHOWA EERA Balance Free Damping Force has been adopted in Kawasaki Heavy Industries, Ltd.’ s Ninja ZX-10R SE (overseas model). We have developed electronically controlled hydraulic valves that can generate ideal damping force based on driving conditions quickly and accurately. With SHOWA EERA, we have realized superior handling stability and ride comfort.
SHOWA EERA Ninja ZX-10R SE Balance Free Damping Force
Substantially increased production volume of IECAS and DPA-EPS accompanying their expansion of application
The production volumes of IECAS (Intelligent Electronic Control Adoptive Suspension), electronically controlled variable damping force damper that realizes superior handling and driving comfort and DPA-EPS (Dual Pinion Assist-EPS), electronic power steering that achieves both smooth steering feel and damping properties have substantially increased due to the expansion in the range of their applicable automobiles. We aim to further expand the range of automobiles these products can be installed in.
[ Production volume of IECAS ] [ Production volume of DPA-EPS ]
Approx. 670,000 units Approx. 1.60 million units
Approx. 1.04 million units
Approx. 250,000 units
Fiscal yearending March Fiscal year ending March Fiscal yearending March Fiscal yearending March IECAS 2017 2018 DPA-EPS March 2017 March 2018
10 Topics
EICMA 2017 (Milan Show)
SHOWA participated in the world’ s largest motorcycle show EICMA 2017 (Milan Show) held in Milan, Italy from November 7 to 12, 2017. We presented our electronic-control technology “SHOWA EERA” and option parts “GP series A-Kit” which we have refined through participating in motorcross races. The exhibition was successful as we had many attendees visit our booth, including courtesy visits from riders we support. The video of the exhibition is available via the QR code on the right. (also available via our website)
Hosted a tour of the Gotemba Plant for individual shareholders
On Friday, March 2, 2018, we hosted a tour of the Gotemba Plant (No.1 Plant) for our individual shareholders. On the tour, we gave an overview of the company and Gotemba plant, latest topics, and technology involved in manufacturing steering products. Then, we gave a tour of the facility where power steering products are manufactured. Through hosting such events in the future, we will continue to deepen mutual understanding and enhance communication with all our stakeholders including shareholders, institutional investors, and analysts.
11 SHOWA’ s Global Network
As of 31st March 2018
Overview of Business
The SHOWA Group consists of our company, 15 subsidiaries and three affiliates, and our main businesses are the manufacture and sale of automotive parts.
Corporate Head Office, Plants and R&D Facilities
Corporate Head Office 1-14-1, Fujiwara-cho, Gyoda, Saitama
Plants Saitama Plant (Gyoda, Saitama),
Hadano Plant (Hadano, Kanagawa),
Gotemba Plant (Gotemba, Shizuoka),
Asaba Plant (Fukuroi, Shizuoka),
R&D Facilities Automotive Parts R&D Centers (Haga, Tochigi / Gyoda, Saitama)
Motorcycle Parts R&D Center (Fukuroi, Shizuoka)
Japan
Shioya Proving Ground
Honda Cars SAITAMAKITA Automotive Parts R&D Center (Tochigi) SHOWA SEIKO Corporate Head Office / Saitama Plant Asaba Plant Automotive Parts R&D Center (Saitama) Motorcycle Parts R&D Center (Asaba) Hadano Plant
SHOWA KYUSHU Gotemba Plants (No.1 / No.2)
Corporate Head Office Manufacturing Plants Domestic Subsidiaries R&D Facilities & Affiliates
12 SHOWA’ s Global Network
As of 31st March 2018
Overview of Subsidiaries and Affiliates
Consolidated Subsidiaries P.T. SHOWA INDONESIA MANUFACTURING AMERICAN SHOWA, INC. SHOWA DO BRAZIL LTDA. SHOWA KYUSHU CORPORATION SUMMIT SHOWA MANUFACTURING CO., LTD. SHOWA CANADA INC. SHOWA INDUSTRIA E COMERCIO LTDA. SHOWA SEIKO CO., LTD. GUANGZHOU SHOWA AUTOPARTS CO., LTD. SHOWA UK LTD SHANGHAI SHOWA AUTO PARTS CO., LTD. SHOWA INDIA PVT. LTD. SHOWA AUTOPARTS (THAILAND) CO., LTD. SHOWA AUTO-PARTS VIETNAM CO., LTD. Honda Cars SAITAMAKITA SHOWA REGIONAL CENTER (THAILAND) CO., LTD. PT. SHOWA AUTOPARTS INDONESIA SHOWA AUTOPARTS MEXICO, S.A. de C.V. SHOWA AUTOPARTS WUHAN CO., LTD. SHOWA (GUANGZHOU) AUTO PARTS R&D CO.,LTD. SRT-Taiwan Trading Corporation Equity Method Affiliates CHENGDU NINGJIANG SHOWA AUTOPARTS CO.,LTD
Overseas
SHOWA DEUTSCHLAND GMBH
Corporate Head Office Consolidated Subsidiary Equity Method Affiliate
13 SHOWA’ s e olo
Automotive Components
Shock Absorbers Propeller Shafts Shock absorbers are critical to an automobile’s character The propeller shaft’s function is to transmit the driving force of because they make the auto comfortable to ride and affect the the engine to the wheel axis. The long cylindrical shaft rotates attitude and stability of the automobile body. With their superior at high speed. It must limit vibration and noise while ensuring performance and quality, Showa brand shock absorbers have high durability. Showa supplies leading-edge technologies, and created satisfied customers around the world. Showa has years our structural analysis enables a smaller number of of experience with strut modules and is also working on components and lighter weight. Further, we have implemented suspension modules combined with peripheral components. friction welding to achieve high precision, dynamic balance and ultra–strong parts connections.
Propeller Shafts Shock Absorbers
Gas Springs
Differential Gears
Steering Systems
Gas Springs Gas springs help to open and close front hoods and rear gates by using gas reaction force. They come with speed-adjustment Steering Systems devices that enable operators to open and close the hood and Of all automobile components, steering systems must provide trunk at optimal speed. Showa develops a variety of products performance and reliability. The steering system is the to meet customers’ diverse needs. man/machine interface that transmits the driver’s steering motion to the automobile and conveys information on running conditions Differential Gears from the automobile to the driver. The term “power steering The role of a differential mechanism is to absorb the difference system” refers to a component that assists steering and provides drivers with comfortable maneuverability. in rotation between the right and left wheels when an Power steering systems are classified into hydraulic power automobile is cornering. These products must offer durability, steering systems (HPS), which use the engine’s power as a drive transmission efficiency and quiet operation. Showa’s differential source, and electric power steering systems (EPS), utilizing the gears are light in weight while exhibiting high performance in vehicle’s battery. Showa has a full line of power steering models. automobiles from subcompacts to SUVs.
14 SHOWA’ s e olo
Motorcycle Components
Shock Absorbers Front Forks Showa motorcycle shock absorbers are used extensively in The front fork is a key structural component of a motorcycle, motorcycle races around the world. From racing machines to holding the front wheel securely and providing the steering scooters, we use our technology and experience to meet a function. This vital part must be able to closely follow road wide variety of performance needs. contours through smooth operation and steady damping force, while retaining high rigidity. Drive Unit Products For motorcycle and ATV drive unit products, Showa has Rear Cushions The rear cushion is attached to the rear fork directly or through achieved lighter weights through analysis of functions, shapes, a link. By controlling the attitude and energy absorption of the and materials, while maintaining excellent durability, motorcycle body, the rear cushion helps the rear wheel to transmission efficiency and quiet operation. follow road contours.
Rear Cushions
Front Forks
Drive Unit Products
Outboard Marine Engine Components
Power Tilt and Trim Units Power trim and tilt units change the angle of outboard engines and provide the following three functions. The trim function provides good screw efficiency and steady cruising by adjusting the angle of the outboard engine while running. The tilt function enables owners to prevent outboard engine damage from clinging shellfish by raising the engine above the water’s surface Drive Unit Products when moored. When driftwood or other objects strike the outboard engine while under way, shocks are absorbed, helping to prevent damage to the outboard engine and boat.
15 Outlook of Consolidated Business Performance
As of 31st March 2018
Status of Shares
Total Number of Authorized Shares 180,000,000 shares
Total Number of Issued Share 76,020,019 shares
Number of Shareholders 4,798 persons
Major shareholders Share Distribution by Shareholders
Shares held Investment Individuals / others Shareholder Name (shares) ratio (%)
Honda Motor Co., Ltd. 25,447,856 33.5 8.29% (4,420) Japan Trustee Services Bank, Ltd. 4,658,100 6.1 CHASE MANHATTAN BANK GTS CLIENTS Financial institutions 23.98% ACCOUNT ESCROW 3,292,998 4.3 (42)
2,960,100 3.9 Foreign Investors 30.71% (211) 2,090,600 2.8 Other corporations 1,750,160 2.3 36.06% Showa Business Partners Shareholders’ Association (87)
1,291,480 1.7 MUFG Bank, Ltd. Securities Traders 0.96% GOVERNMENT OF NORWAY 1,252,000 1.6 (36)
992,100 1.3
STATE STREET BANK AND TRUST COMPANY 505001 937,002 1.2
Board of Directors and Corporate Auditors As of 23th June 2018
Representative Director President Nobuyuki Sugiyama Operating Officer Shinichi Miyajima
Representative Director Hiroshi Ichimura Director Operating Officer Yuji Kumagai Senior Managing Officer
Director Managing Officer Takeshi Nagao Operating Officer Yoshiaki Kawakami
Director Managing Officer Narutoshi Wakiyama Director Operating Officer Takahiro Furuhashi
Director Managing Officer Tetsuya Matsumura Operating Officer Tetsuro Eguchi
Managing Officer Yosuke Sekino Director(Audit and Supervisory Committee) Yosuke Mano
Operating Officer Hidehiko Koyano Outside Director(Audit and Supervisory Committee) Tsuneo Mizusawa
Director Operating Officer Kazuhiro Nishioka
16